Second mortgages are popular ways to consolidate debts and pay for purchases because of their tax advantages over non-deductible debts. Second mortgages are literally second loans secured by the home, which is why they’re also known as "home equity loans." Second mortgages are also gaining popularity as "piggy back loans"--a home financing option in which property is purchased using mortgages from two or more lenders with the risk being equally spread among them.

2nd Mortgage Advantages:

Whether you have good credit or bad credit, second mortgages allow for you to cash out on larger amounts of money at relatively low fixed mortgage interest rates, as compared with credit card rates and variable interest rate home equity lines of credit (HELOCs).

Second mortgage loans may be 100% tax deductible.

Flexible guidelines allow you to use the money for any purpose, including debt consolidation for lower payments and significant monthly savings.

A second mortgage leaves the rates and terms of your first mortgage unchanged, so instead of having to refinance your existing mortgage, just add a second.

2nd mortgages normally fund quickly with little or no closing costs. Example: Nationwide Mortgage offers 125% LTV and other second mortgages, including interest only loans that fund faster, often with no appraisal fees.

2nd Mortgage Disadvantages:

If you fall behind on the payments your mortgage lenders can foreclose, which means you could lose your house.

Second mortgages carry higher interest rates than first mortgages. Nationwide loan officer, Brendon Daly, states that "due to the risk factor with these subordinate liens, most lenders will charge higher fees and higher interest."

According to "Mortgage for Beginners" found through ask.com, some second mortgages carry high upfront fees, closing costs, or other annual fees, as well as prepayment penalties and balloon payments.

Maria is an experienced free-lance writer creating articles about 2nd mortgage and home equity loans. You can read more mortgage related loan articles online at Second Mortgage Nationwide.

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